Wall Street extended its downward slide on Thursday with the Dow Jones industrials plummeting 679 points to well below 9,000.

The decline brought the Blue Chip index down to 8,579 – its lowest level in five years – in a drop that was fueled by tight credit markets, uncertainty over government actions to bolster the economy and a sharp decline in shares of General Motors.

Thursday’s performance offered a sobering contrast to the market conditions of a year ago, when the Dow hit its all-time high of 14,198 on Oct. 9, 2007.

“Psychologically, now is a tough time for any investor, whether you’re invested in a company-sponsored profit-sharing plan or a mutual fund,” said Nancy D. Sidhu, vice president and senior economist with the Los Angeles County Economic Development Corp.

“All of these companies have to do reports every quarter … and the new ones aren’t going to be pretty,” she said.

Standard & Poor’s Ratings Services put GM and its finance affiliate GMAC LLC under review to see if its rating should be cut.

GM has been struggling with weak car sales in North America.

The action means there’s a 50 percent chance that S&P will lower GM’s and GMAC’s ratings in the next three months.

S&P also put Ford Motor Co. on credit watch negative. The ratings agency said GM and Ford have adequate liquidity now, but that could change in 2009.

Sidhu said the auto industry is especially vulnerable to the credit crunch.

“If an industry requires borrowing money it’s at risk, and the auto industry does,” she said. “Most individuals who buy cars and light trucks buy them on time. And the availability of that money is coming down.”

Auto dealers also need to borrow money to finance their inventories, Sidhu said.

Christopher Thornberg, an economist with Beacon Economics, said GM was already hurting.

“GM was on precarious footing anyway, and now they are facing the mother of all economic pullbacks,” he said. “The whole thing is a total mess.”

Financial experts have dickered over whether the nation is or isn’t in a recession, but Thornberg says we’re already there.

“Give me a break – unemployment in California has gone up 2.2 percentage points in a year,” he said. “That’s a recession. In the end, the economy is made up of people. And unemployment is the primary measure that defines a recession.”

Figures released last month from the state Employment Development Department reveal that California’s unemployment rate for August was 7.7 percent, up from 5.5 percent in August 2007.

Fears over the economy pushed stocks lower late Thursday in the final two hours of trading after a volatile start to a day in which major indicators like the Dow and the S&P 500 index bobbed up and down.

The Nasdaq, with a bevy of tech stocks, spent much of the session higher but eventually lost steam – falling 95.2 points – as the sell-off intensified. Still, its losses were less severe because of the relatively modest drops in names like Intel Corp. and Microsoft Corp.

The Dow has lost 5,585 points, or 39.4 percent, since its year-ago closing high. The past year has made for the worst run for the Dow since the nearly two-year bear market that ended in December 1974 when the index lost 45 percent.

The economic crisis that has roiled U.S. financial markets and markets abroad has many investors scrambling to find a safe harbor for their money.

And there’s certainly been cause for concern.

Like dominos, a slew of major financial institutions have fallen and fallen hard in recent months, as the ripple effects of mortgage loan defaults, home foreclosures and tightened credit standards continue to work their way through the U.S. financial system.

Sven Arndt, a professor of economics at Claremont McKenna College, says the nation’s current economic crisis is far-reaching.

“It’s big – certainly bigger than we initially thought, and we still don’t really know how big it is,” Arndt said earlier this week.

Are we near the bottom of this economic chaos?

“Near the bottom? There are so many bottoms,” Thornberg said. “Banks are in big trouble. A lot of these guys are under water and that will take time to work through the system.”

Kevin Smith handles business news and editing for the Southern California News Group, which includes 11 newspapers, websites and social media channels. He covers everything from employment, technology and housing to retail, corporate mergers and business-based apps. Kevin often writes stories that highlight the local impact of trends occurring nationwide. And the focus is always to shed light on why those issues matter to readers in Southern California.